A High Credit Score Means More Savings

A higher credit score will result in lower interest rates on mortgages, car loans and even credit cards - this will save you thousands of dollars over the life of a loan. And attaining a high credit score is easier than you might expect. It mostly involves paying bills on time. Here's what you need to know about getting your credit score into tip top shape:

1. Why is the Credit Score Important? The credit score is your financial GPA. It gauges how well you manage money. And if you're about to apply for a mortgage or car loan, the higher your score, the lower your interest rate will be…and this will save you thousands of dollars. Also, landlords typically check the credit score of potential tenants. 2. Use Your Credit Card for Small Purchases: Think about the credit card as a way to build credit and not as a way to spend more money. Credit scores drop because of debt. If you use your credit card for small purchases under $100 per month, chances are you'll be able to pay that off right away, since it's a manageable and small balance. 3. Pay All Your Bills On Time: 35% of the credit score is whether or not you pay your bills on time…so the most important task to do is to pay off your credit card balance in full and on time. 4. Don't Close Down Your Credit Cards: If you've had a card open for more than a year, don't close it down…you'll be erasing vital credit history from your credit report (the transactions/info on the credit report make up your credit score) and this will hurt your score. Instead, simply cut the card up if you don't want to use it anymore. 5. Debit Cards Don't Build Credit: Debit cards don't report any info to the credit bureaus. Only credit cards build a credit score. 6. Stay Away From Prepaid Debit Cards: Especially those endorsed by celebrities. With a prepaid debit card, you fill the card up with money and spend it later. The common fees of prepaid debit cards include: activation fees ($10), fees to load the card with money ($2+), monthly maintenance fees ($5-$10), dormancy fees (up to $5).

Other celebrity-endorsed prepaid debit cards from Russell Simmons and Alex Rodriguez have even higher fees.